Cash cows are usually large corporations or SBUs with the ability to innovate new products or processes that can become new stars. Corporates should not invest in cash cows to encourage growth, according to the revenue-share equation, but only to help them so that they can sustain their current market share. Strategic choices: decommissioning, divestment, liquidationĬash Cows: Cash cows are the most profitable brands to have as much cash as possible, and should be “milked.” To help their further development the cash earned from “cows” should be invested in stars. It is therefore also necessary to carry out a more in-depth review of each brand or SBU to ensure that they are not worth investing in or have to be divested. Some dogs may be competitive for a long time, they may provide synergies for other brands or SBUs, or they may simply serve as a buffer against moving rivals. These are usually not worth investing in, because these produce small or negative cash returns. Question Mark or Problem Child: Market Growth Rate is high and Low Relative Market Share means the product is in a Question Mark Category.ĭogs: Compared to rivals, dogs retain small market share and operate in a steadily rising industry.
Dogs: Low Market Share and Low Relative Market Share means the Product is in a category of Dogs.Cash Cow: Low Growth Rate and High Relative Market Share means the product is Cash Cow.Star : High Growth Rate and High Relative Market Share means the product is of Star Category.Business units operating in fast-growing markets are often cash consumers and are worth investing in only when they are projected to expand or retain market share in the future. High market growth rates mean higher earnings and often income but they also absorb tons of cash, which is used as an investment to stimulate more growth. Thus we can say that “Company X” has a relatively high market share. The BCG Matrix is divided into four quadrants: Star, question marks, dogs and cash-cows.Īnother Scenario is if we are considering Company X which has a market share of 60% and the largest competitor “Company Y” is having a market share of 20% then the relative market share is 60%/20% = 3/1. The general aim of the review is to assist in understanding which products the business should invest in and which should be divested. These two dimensions show the company portfolio’s probable productivity in terms of the cash required to sustain the unit and the cash it produces. It classifies the portfolio of companies into four categories based on industry attractiveness (that industry’s growth rate) and competitive position ( relative market share). Growth-share matrix or BCG Matrix is a business method that uses relative market share and industry growth rate indicators to determine the value of a portfolio of company brands and recommend additional investment strategies.īCG matrix is a tool developed by Boston Consulting Group to determine the competitive role and ability of the portfolio of company brands. Relative market share is represented on the horizontal axis and market growth speed is represented on the vertical axis. BCG Matrix is a strategic method used to represent the company’s brand portfolio or SBUs on a quadrant.